Here are my posts for the past two weeks:
What Do You Have to Show for Your Work
Comparing Your Investment Returns to a Benchmark
Here are some short takes and some weekend reading:
Dan Hallett has some thoughtful criticism of risk ratings of mutual funds and ETFs. Personally, I don’t think of risk as “low,” “medium,” or “high.” I think in terms of possible losses. Each asset class has some amount of loss I should reasonably consider to be possible. I usually think of the entire worldwide stock market as possibly dropping 50% for some period of time before eventually recovering. The possible percentage drop is much lower for fixed-income products. For any individual stock, the possible drop is 100% (with no recovery). Using these percentages, I look at my portfolio, imagine these drops happening and ask myself “will I be OK?”
Canadian Mortgage Trends reports that CMHC is raising premiums for high-ratio mortgages, making mortgage insurance more expensive for Canadians. They complain that these increases are “not well supported by any publicly available mortgage risk data (default rates, overall credit quality, equity levels, etc.).” This is a common logical error. The real risk is that future default rates will be much different from what they have been in the recent past. CMHC premiums need to reflect the risk looking forward, not default costs looking backward. I’m happy to listen to arguments about whether the new rates make sense, but those arguments have to be based on actual risk, not assumptions that the near future will look like the recent past.
Preet Banerjee uses his latest Drawing Conclusions video to explain that the costs you see on your upcoming account statements due to new reporting rules will actually be far lower than what you’re actually paying, if you invest in mutual funds.
The Reformed Broker explains to people trying to profit from trading on the reaction to Trump’s tweets why they need to give their heads a shake.
Canadian Couch Potato updated his model portfolios for 2017. He also goes over the 2016 investment returns in various asset classes as well as the performance of the model portfolios. Just in case that’s not enough, he has an interesting podcast featuring a hedge fund manager who advises people “to give up the dream of market-beating returns.”
Jessica Moorhouse interviews Dan Bortolotti in one of her Mo’ Money podcasts. One of the many interesting things Dan had to say was that part of the problem with advisors talking negatively about indexing is that their training includes little about indexing, so they often just don’t understand it.
Robb Engen at Boomer and Echo reviews a very interesting-sounding book How to Think about Money, by Jonathan Clements. You can also enter a draw to win a copy.
Big Cajun Man reports that the bulk of the job growth in Canada in 2016 was in part-time jobs.
My Own Advisor is giving away a copy of the book Victory Lap Retirement.